July 31 report, econ tensions

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oI U.S. views for July Japan/Unt€d States Economic Dis.ussions a^kd 6/30112

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(2)

National A$ociation of

lo cdfitu at @ftBati@ as.@tatlad a acbber

19

ofttade|lN$tMtadM tne @,@rDs ad !6itlas q,B.tlq ap$eclab it it

soD woDld

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ah

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o!

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Lgl!-lgjt j4lltjlglf!:tr !!-!:rt:!a{o:rrc Drs.-is-.Ioris Tt)c follorihg is a descripiion of issucs atrC sur"rEry of United states vievs on thos; issues Nhich dre united states proposcs to dis.uss .luring Ur6 July ceonohic talksthe unitc.l states lrdcrstands that the puxpose of the talks is to eaciange vi.(s .n topics of concern to the UniteC Statcs and to Japar, ana !o .lcv.Iop means of irproving cooperatioD in solving our hutual bilarera:L prolrlens and to explore iethb.ls of coopelation in nultitateral forurs. losard these ends ee hope to be able to dcfine issu.s ,hich .ir: .ri..r on ir rhr u,.:tre. t-.tc _c. r:ions viLl' , vi-w or .1. o:i,crrrals.

I,Ie also hope lo exchange ideas on th. scope of hultifatoraf trade Degoliations aDd basi. prjn.iplcs vhich miqht gutdc them. Tie UDitc.i Slates atrd JapaD both have increrslngly ituportant jhr:or.Ets at stake in tLe evoluiion oi thc int.rtration.lr tradins systom - both ils ,ut.s and inltitutions and Che libarali2at:oh oI tradc uithin that fraret{ork.

Tic intcrests of lotn our,ations arc serv.d bI the con: on plr.uit of improveinents itr thc int.riationrl tradinq syste( \ehich ,e.tircc aliscljmiDation aud liromot. trnde e):Drrciorl triro"!l'urL rr'r ho.16, Co. ..: .. L'-, o should e):p1orc ideas on thc ag.Dda aDd the ba.ic o,rj.ctj.ves and approach to nultilateral Dcqoliarions in 1971, to ens!):e Urat ou nutral :interesls in th. lrorld econohic svlte:r are iJ.q.. Lcly r..:,,. i.rro ,,uJ, I irt ,.r.r.Lo.,.e.il )1.,.

In lbe sane contcr:tr ir Nould bc dcsi)rablc to .1eve1op a commcn understancljrg on sonc.f the !/ork in olTT and olCD vbjch might bc acceleratcC/ vith a vict to re.c\ing specific J!r'c, .{ .i.fs i n r l-2. P o. , vou'J bc - .1"onsr'.Lro'i .. . L: r.i 1,.orr tri ,.^y tradj.ng couDtr:ics as \rell as'oa aenon.tratioD of tlre us.iu1ncss of ,nultilateial negotiations at a tin. vhrn drcr. arc ir^r. sirg p. ,ri' Jo..l L-.

Our broa.t nulrral inricrrsts in th. v)orld ccoxoric rtster:, also defend, hovc\tr, on a s.!i:fa.to4' ,r.lance oa ccononic rclrtions botlJecn u5. of grcaL .on.crn is th. conrinued vcry t.)..Jc imlalance i. lr:ilat.r.] tlae.r betr.cn JaDen an.1 tie 'r...J .o

.-.:,,j.u ij-..i,.. o... i' t.-' .t ... .. -.. .,:i..by i.Jr' , '. .. .i,o .-l Lo ,' .r ' .lnpin of its l)iqh level of rc.rtrriction. o, r'r.orli rna on :n l. .t' ,rr.,,.r1t l,i 1lr. .,! rr.il lrr1ilri.. .a ,)rr:i..i:.j

-2 i.trt rio-.r ,r 1 , ,,o.r i:t d:!!:.::j: i:l:. :1 ,!tr3 of rri ,r,rr,i:!:,, iir!1.i::.!t.t-':da oa -. f,.rl J:lpan.,.,- !1.n. for fL,rth.r riijr. -.-..ions to r..:!.: the tradc i,n.i Li,.' brlnn.e.I-prr,:.D:.r.!r5lus.

Jair:!'..$plu: !r.b1.r i:; nl.o a ri.iiou5 l!.rri..:t proil.i a..1 c.::5.qI.ntly tt!r:e ii c:tc.r .ocd to fin,r concrctc srEFs vhic\ ftighr be ri):en in the n.ar future, The degree to vhich the Japanese econony is i.sula'.ed irom .z.hange ratc chalgos anit thc forces of the internatiohal n.ijust cnt lrocess is a significant catrsal factor of the prcsent tcnuous a.d difficult sj.tu.tion.

Erforls to .edu.e this iDsutarion oI the econony \'ould bc lrrticttrlarl, uscful in pronoting oux tjoibt inteiests, as vrefl as in pxo*ctirg a nore .ffccriwe lrorId cconoNi. sysren basdd upon rorc flcxiblc proccsscs ,of intcrnational adjusa'Iho Unitcd states approaches thc July discussions in spiriL oI cooleration and !,itlr the Ilope that neilningfut

a

Le i'. d. o. rh.-6

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a. currcnt

lrorl: ,roqrans

the United states hopcs UraL si-.hiticnnt ploqr:css can be in 19?2 toeaxd ,caching agreeiEnt in the GATI on the problcFs of studarrl./ export snbridi.s, custorie valuation and irtrporl licensihq ah.l ir thc O,CD o. governncrt procurc(.dt. the Unit.d statcs dcairos to eork clos.ly rrith Japan t\ achieving tilis objcctivc, perhaps thr.ugh joint elforts to achicvo internaiionat a.Jr.en.nr j.\ al: least tlro oruese d..,- ir - 972, B- !C rnln.rerFnt The United Statcs has consist.ntly.nppo):te.1 t\e enlargencnt aid strengthenihg ot l:h. Iuropean Codinunity. Thc Unit.d Statcs and Japan share <a condon intcrcst that rhe cn1arqed Itrlopear co$$u^ity dcv.lop outvard l.ooxing and filr.ral lrado Pol.icjes. In Lha Gl?r j\rticle xxIV revi.$ ro lr69in l:tar this 1c:1r, rhe unite.i states anrl Japan hnve an oprortunity to cooperate in ensuring that a thofotr(lh an.l pcn.tratina, cxaljration o! the !cc.s.io. trcaty is conauctcd to dct-crminc its corsist.ncy gith ti. crlT, rhar thc trade interests of thi.d countries are f!]1y taltcn intd nccotrnt a.a lhat tha j\rticle xrlv:6 re.Jo'.:iations bcgj.n as rapidly as possibl.. ao, ils !rrl, the Uni'..d statas intands to nse the !rocc\tur.. of r\rti.1c irxl!,.7: (r) ro :!r..rrain vhets.r rhe irsr:rr:::ehts of <lccc.sion fullitl th. rc.tui.relr.ntool x.\:ivj:i(.), (2) to !roh. n5 th.rourrL:r-y a. !o.sirrl. t. ^rrj.c1e pjnp.iit t:t!,r:r:. -rcct sr.cjtjc iii[trj!'.d olr trni].r, .i.d (r) to nn.le

'

GATT and oricD

an dnlarqcil r:i!,.!c.n Coriiunitl, .1. !1s .ccor.lj.rly \ridr .i:,,,tr!c -o our trr.lL, Jrr'ij.u1ar1y i. jjti..qrcnt n.9o!iatior. rn.l.r irti.t. )i)rit::6. \te Nart a i,::.)ir aNt aho!ou!:: cxanirntior :,nC \iclrId .r1:..i to h.!. qni.l.lj, ii,i. .1rtic1e xxI\,:a n..r.tjrLioi:s b.:.r..r.r:rary l/ 1971. ii.irring this approach |.i5..1 on :, d.Icir::. or: our txa.i. int-r.jrJ sirould rcinforcc our pdsti:io.s in doalins liith the preferentlaI trading arrange.ients the nuropean Coftrunity is nogotiatinq with tho EETn iion ?\pplj.canls as vell as the prefor.ntial traaing arranqenents eith coironvcalth doveloDinq couhrrios.

C- ulti1.t.:ra1 snf.on.r.ls The present situat:ion involves a variety of procqdurcs and varyln!, practices rry diftereDt countries. sorious concexns over lhcjr a.l.quacy have developea. It .p!c.xs essaDtial that future Dcaotiations includ. dav.lopri.nr oi a.lequat. nultilateral rules nnd pxoc.duros r+girdinq thc ihplemcntation of safequard measures. rhis aill bc an .sscntiaI cl.meot of trtullilatcral ncaotiations ro liberalize tr.rdc. fhe broad issle of saf.quards to be d\.ir'blc n rh. uru,. iJ .1.,1..1y L 'lor J s r s:.i. in thc GrrT comtrj.ttee on rrade in I.dustrif,l PlodDcts, but mo,e iDtensive cxanination ts nceded.

Certain idcas on tho qu.stion of multilateral rDlcs and proceduras lravo been delelopcd in thc OIrID lligh l,clcl croup as aD integraL palt oI thc norc general discussion of trade liberalizatioD. Does lhe Jalancsc Governn.nt have other id.:q?

1I.

Bilateral Issu.,s

4. lggryIij frqli! lrq Lc_vqr 9laarrts c1. r,b'.i i Lr il-n:-- r-:-..

Crosth and stability in the v/orld econo:ny lequiles the . elirrj.ratiol of large and persistent paym.nes int,alances su.h as lhose whiah charactorizo tl)e positjons or' lhe Unilcd Flrrr I d, JnP1.. l \- ,b- . .c ry 1 :. -' to achicvc aatisfactory eqriliLriuri, lot only lhc narion.L 9oa15 of thcse i\ro â&#x201A;ŹcoDomic s!r).r poxers but the h.,althy functioning of tie v/orl.d cconony eil] . The internatio.nl rcspo.eili1itics of the Uni'.cd states/ includinq thoie to th. .levc1opin9 $orld/ requir. thae iL nEintain a siTeable surplus. That surplus hust, as a practical mairly tron the H.rchan.iis. trade dccounr. A:lthoLrqh Japan .ss.rts thai: it n..ds a curref,t a.(ion.t surp,'!s in part.s a n.ans of fiDanciDq erirorts of c.lri i:il nc..1.a !y d.v.Ioping cou.i:ri-cE, tn.r Uni,..!.i st.i.5

str!1us fnr:ir..::a,. the le\,.r

apanrs bi1-,i:(:, nl rra.le rr::1aac. ..1.,r:r:;. inptr.i not on i,.c...t irte.-

.}l i:),,.,Eaff stabiij:y Secaus. oi the iiraortrn.e of Japan as a Lradilg pn.tner, lestoratior of a satis:actory surp).us by rhe unite.i states in its nelchandisc accornt \ril1 reqnire early and su)sranriaL c.rre.t ti. if,Dnlanc. rrith JaDan. 'Itre irnited s,.i \ -,, .^'... nqir6 .o. r'o iF|ovo its .o... -:r',^ po."'01. \J rio.-1 .r. l-o.r .. i).cLonq bl'J., 1', crr /rso r^qrj' :on.. rf) .cring inp.irls of a niimber ot pro.trcts nawc becn nodifibd 6r .liminat.d by the covernm.nt.a J.1pan ir rhe past yoar or tvro I inportant barricrs oJ various typ.s r.nai. firnly iD p).ace/ fru5trrtjnr clL. f,dj, qtmFnr prvc.sr. . res'i1t, proj..tjors ^s a sna1l Darroeing o: of Jnpar's pn:ric^Ls position rangc fron |)re lalgc sxrllu.cs \rith th. Unj.tc.l states to eve! a possibility of Iurthcr inc.cascs.

Sati.,factor/ improv.ment, in terhs or both na.Jnitude ard tiNinq,carnot be rcalizcd Lhrouqh anticipf,ted incrcases in inpotts du. Lo cyclical :r.tr.ls in t!. Japan.se econony.

Positivc actions ara requiied dt an carl.y aaii. to rarove barri.rs.to co,ipcl:itivc inlorls and to fncilir:ate the devclopm.nt or tha irterhal nlrtcL for such produ.ts. Such a nodificatior of J.1pan's balnncc of payr.nts 9oi1s in thc trade axoa uould str..gth.n lilleral trado Iorc.s elserher:e in tle rrolld and cou:Ld gilv. stroEg aCdiLional inf.txs to j.niern.rtional coopcratio! jn thc soluLio. of other types of lxoblorns aflectiDiJ norld PaymcnLs .quilibrim. lr. Trade and Invcst|.nL I.i.ru(is f.-. Jrlinnesc h,!..t Quotas rapan maintains qnarti.L:atjve irport restrictions inconsi.t.n! ,ith its CA.:'l obl.igaLrions. fhe5e rcstlictions arc piitictrlarly inportlt to th. Uritcd Stntres L.carsc th.l' aff.ct products in lrhich thc Unit.d states is conletitive. liiong thlse alc cl.ectroni. comuutors anrl periphc.nl eqtipren: ard tnej.r pa.Ls, intcarat..l circuils, catirlc lcai:h.r, frcsh ofrnqes, becf/ .itrus .1nri other jui..r/ beans dnd tr.is, ana !.,anuts. lhe Unitc.l Statcs covernrrert trr.jes tho Jnpf,,rcsa Covclrr.nt Lo vcly carly dagc rh.s. r:c:tricLiors r,iicho!L in.rcases in taxific or otl.-r protecti.ve ri.nsures. l',L.th re:rpec! to th.s. prodlct., tnc UniL.d sta:es slggi-s1::j ) ... ro.r,.,. coitrt) ::.r.r !fri pi:.jirt!.rnl. .quipn.nt ptr.t3 - cnrly..r:rll.t.

Ii b.t:n lizr Lj on.

anC th.ri.r

intesrared .ircuits - carly conpl{rte lilr.ralizatj!r. .ihh:|. 1earl,r. - initi.tion <rx.l .:.of:ag.;:..t oa jo:inr.:forrs by thc ll.r:.1r.: indr.itri.s oI ,iiPri a.c:hc UDi if, .l -st.t.s to slbsi:.i,;i i:r.It er.pan.l'.irc :r.:rh.t ror le-Lli.r ;r.o.iucLs in Jn.irr. rLn.r..sir.t itr. !rlsdit c):!renety 1o-r quota levets i:i .rtso dcsircdflesh orahses - renoval oI quota resrricrions fo! . thosa nonths vhen donestic produ.tion of hikan orangcs is hol: available. i.e. I l.{ay-Octobcrbcef - conversion of thc a.i valoram lariff to a specific duly o, f5 ccnts per pound o! Iess abd xcqular ard su]rstantial increases each year in the "hote1 quota."

IrDit jDic.s - orrhse - reNoval of qu.ta ros'.rictions on bulk oxange juice.oncentratcs tor furthcr processi.g in ilapan and encourage coorerative u.S.-Japan irdrstly plans Ior b1c,ding inported juic. \ritlr dorcstic inice; other libcratization or siqnificanl anDual quota increases aor g,apefroit, g,apc. apple, pincalplc, tomaro and othc! juicas. peas ahd treans - partiai tibcralization or significan! quota inclea.cs for dry peas aDd sucll l.idney-lype bc..ns.c.n'\y, prrro, q,r''t no, '. n, "d 1.i!, L(J Lldr4J -nr olh. colo cJ Jr l Lh c L.rns -nl rlr.\rl oI Ll,c 20 porccnt slecial i{port fce.

I r|.-rL - (q_our' uL:) -Lr-'.'r' quoLae luturc . annual in }rars, g3P:!9.-9_51"_Lrl+'_"t_&r 2..,,q,i.dlrdrn1 lo,r.ni'qi.r h additio! to qrota ii:ens thc United states rcques:s lner ,cal Lr' r11: ov...'l t".,"cq o: 19 c'-1r.0 ol lc?.1 oLu!rt co,ro'.,ic.

5200.100 '15 Ihis he facilj.irted caD by i,lcrcasing lurchas.s S1.2 bil-lion. of major U.S. erport contu.diUics su.h as fecdgrains, soylr..ns ahd tolracco as ve1! as ne\r.! !!oduc!s in the pr:oc.ssed foods sector. In tbis conntction tnc united srat.s \rish.s to djscuss the .:ftects oD u.s. agri.ultuial exporLs oj Japf,nis rric. diversion aDC aislosal proqrarrs and Japnrrs prog.ai to der,clop altciirtivo sourc.s of supply.

EoreiqD Invesl,m.Dt i.n Ja|n!

TNo aspects of this pro!1em nffectihq u.s. e):ports are of inmadiata: conccrn:

a. r,ro...:ijnq and !r.!.9iJrir - Iirj:r.i {ti,.ta r:e:tri.ha!.

L-.r r.:r,!.d ,'r.,, :,ir-.1 :trr i.r'i1r:,:fi i i_ri ii.i,i

..

J.L, : ix L:iie rnani:r Li,.ri fitrd ibsc' raLi.r,::l nnd.concrnic.

'Iir. ii.i a.{: siat.::.ltrsii.:s !lrat Jnpane..: ri.nu rtions be iif,,iai.i i. p?r:nit !....:r.:!r?, ni:i.9 an(i r,r..t.nginq of irr:.r:t:.1 t,roducts j.r |0! f.rccnL tor.!s. .II..t cI[cr]Iiscs in Jepan. friority should be giv.n to pcr,ritrinq such pro.essing ol ch.nicalsr .osfretics, ard phoroglaptric a.nd ro, nr.rtor''d' hic i'ln. In ..p.n, b. 1\'a tjelieve rapan should p.rnit lhe cstablishmâ&#x201A;Źnl: and operation of branches and \rholly-olrned subsidiaries of foreign firms enqalic.t in eholcsalinq and servicinq of co.pul--s ..1r.-d.^.. .qLip! n, In,;d.L ol, anC particularly to assist the salas of U.S. consuner products, Japan should p.r it U.S. firn. to estnDljsh and oparate yh.uy-ouned xccail storesr strpernarkcts and departir Jalan. II uniriitcd fo,cign irv.litnent ln this licld cannot be glanlcd imnEdiately/ auto.r.Lic appioval for such.tores could be limitcd at Eh. pres.nt rinc to 24 stores pcr nj?pticant. such action. Forld rrrins najor benefits to th. J.lprnese con.nner and xoul.d bc consjstert sith Japanrs e{Iorts to moCarni3q ir:s distribution system.

4. IdporL Ninancihq _ih Japan, inclu.tin.l SLandald frcthod ol sctr:I. .nt .

Tnc,niL..l s'r - Co., n nl ,. q 'l( . ..resc Covernnenl to take 3tc!s to furthcr ea.c rhe availalrility of fiDancin.J lor inlorts and to r.'nove 5uch consLrainrs on accas. to ,irpor]: financinq as the requircnanr rhat paymcnts f.r all irliorts be made in accordauce virh thc covrrlnrcnt,s rrlrtan.lard trcthods." h oE vi.rr, importers shoutd be flec to arrrnge their financing and paytrEn|s in any nunhcr rbst snitabla to thcn and not be r.quired to 90 throlglr thc un.erlain a.ld tilie consuning process of seeki.g advance .1o

Govelnrocnt apDroval,

.rnpanesq

!4!lrls

The clTT taiiff stuCy strgqests tha! Japan.se iarifts . on na.ufaclurert products avcrngc consid.rably hiqh.r than any najor developed counLly other Lhan the UniteC (ingilom. 'rhis pariicul.rly is if one takes j.nto accounL thaL JapancEa jfport duLi.s aretruc app:Lic.l on a c:Ir} Lasis and thar trtrnspc:Lation costs ro the Jrpane.c marn.l] arc high. This hish tariff poficy is innDproprilate in \,1a$ of Japan's large global trrade sulplus and the Colerhnerl of JapL.r,s av6re.l policy of ,!he Unirod Sraras al:t.nirting to lovc, pricos cotT.r. eni holes tlrat thc Japtr,,e.c Corc.n .nL ecnid con.ider r.]:i.! furth.r nnil.atcral r.dn.r:ion. in dlty on ;:oy nqricrl, l:ur.,t and i..iu:trir:!. itci:r oa r.ritlr irir...3Lr to ttt. Uri rcC 5t:,1:-.t ii...i:.rL t. r..1!..1

ti,. Japan.s.r Covcrn .nt eon:Id .or,riiLler . ocncrnl [ariff

red!.1:i.on that \rotrl..i lrilrE'Japanese ta,:!l!:. nbre into 1in. \ri'.h tr)o.. oI othc:: r:,jnr..unfries.

i'h. Unitcd Stlt.. i5 c.ncerrcd r!.,nl th: ca:.cts irade ol thc cisparitics i-n tne lewcls of ocear freaqllt raf,es in the liner.onfcrenc. taxiffs cov.xing exports froh tne Unitod States to Japan as .onrpared t. those f.on Japan lolheUlLcds'-, Thc offorts of ra Jap.nosa l4inislry of Tra.sport and the U.S. le.lcraf ,{aritim. Comission to corrcct the late disparity situation in the Japa!-u.s- trada shoul.l bc. cncourallca. hre axc pl.cascd that thc involvcd ocean confer..ces arc coop.rating \{ith our rcspcctive qov.rnmani:a1 a.lcncies in order to effecl appropliate solutions to this c.nlrLox probler.

I p cL .1, '' .-,, O:.p, i.i:. , ,y r", on trade, ve eould.obsidcx it appropri.te to leviev in duc course tle progrcss nadc by thc involved parties ir e1iminating tbe dispnrities in ]:he .rapd u.s. tradc.

Tho progran \rhich tho involve.1 occan collercnces have iDitiated to develo, a unjform comiodity dcacription codc shoutd be slprortcd and bronght to an carly eonclusiouHc believa t]lc escablishm.rt and irplcncntation oI sx.h a code vril1 greatly clarify ttrc rate dispfity problcn ana vif 1 facilita!e n.anin.JIul ratc conparlGoDs. 7. Japancse Gov.rnm.pt Procutcn.nt oD

.. .1.. iB../ Jir ..i' u!p'nc-- Lo\--n.io r ]. 'o.".r policies and praclices effectiyely deny u.s. sup]rliers any o!)to!':unity to se11 to Japrncse Govern^cnt, quasi-lolexnri.nl, governncnl-Iinanced and "govcrnm.Dt seh:riti.ve' organizations, e,:cept iD those cascs \rhere Do co[para)le JapaD.sc, producl is

...,.',,1 rvii'.rrt .. r\..n .',.. h s'.e.:. o 1...;.. procur:eNeht of piol:otypcs onl\, \rith sulr.equcn'. ordc!s pLaccd eitl) dom.sti. tirns. th. utrited statcs covornr.nt uislres'd to 'r'95 ,\1 1.,1',i.. ,1 o.r 'u4 i,r r.. " to p,ojecL. on upcoNin.r and .ontr.cls on nn cqnal basis l)itll .rapancse Eulpticrs. ue l,.tievc tnat thc polic! rcAarding tn. purch.r. of nLlc:I..r pover plan'.:i ir Japnl should be chnngcd to lierfrlt !.S. fjrrns to n.t as priic su5seqr.n'! lIalts in a.Ldition !o tho protottP. plan:.

3. Japipese 6ov. rnn. pg_!.!,9*_]l!s4i:9s_ the unitod stalos !)ish.s to dis.uss se!cr:a1 asr,scts r:o ir.r.a:e ex!.r:t.i, jnclldrig of Japanase j e;rt.r:t-rel ;i:.i t:i. r..nti.v.,..

Jzrpi.c.e (ilr:..r i,r..:ln:nt in l,ir. i;r:'.e.t SLnC.5 i! vcry sr[:11 in r.1..ti.]:. L. Ll!:r iiPort.rc..: ili.r unjtcd stit r:r Japnn!!e lnvert.l..r: in .i:. i-!it.!l ,!jLat.s j1.,. r.cn....r.ni:r.ttld in saj.s subsidirri.,s of JipJn.se firn€, Dtr.iDg thc pasl yca! th.r. has bcen g.orritrg Japrn.s. int€rcst i.n hntrf::cturing in./.rtnetrt ir thc u^i,..d StaLcs and nnDy Ja9an.s., cofrpa.i.s have uDdcrtalrn .ictailed narker .nd lcasilrill.iLy studics.

Ilolrcver, dcspit. th. nutunl advanta.rcs .n.h invcstr.nt ,ou1d have/ there sti.ll app.ars to b. a reluctancc to 6alc su!-. !-rnL:'l

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